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Is Walmart’s Online Strategy Enough to Thwart Retail Woes?

Zacks

Amid an environment where retailers are failing to win investors’ confidence, Wal-Mart Stores Inc. WMT is showcasing a superb bull run, courtesy of its aggressive efforts to counter the industry challenges. Evidently, shares of this Zacks Rank #2 (Buy) stock have rallied almost 43% so far this year, in comparison with the industry’s growth of 32.2%.



The retail space has been grappling with various challenges associated with consumers’ shifting preferences to the dot.com bandwagon. Consumers’ rapid shift to e-marketplace and the growing dominance of e-commerce king Amazon AMZN has made things very tough for most retailers, primarily by hitting store traffic. Moreover, intense competition and increased promotional activities to stay afloat amid a tough industry has become a threat to margins.

While many retailers including Macy’s M and J.C. Penney JCP among others are trying hard to cope with these headwinds, Walmart clearly stands out as evident from its splendid success story. So, let’s take a look at the factors that have made investors bullish about this supermarket giant.

What Has Walmart Been Up To?

We note that Walmart is firing on all cylinders to evolve with the changing consumer environment, and compete with brick-and-mortar rivals as well as Amazon. This is well-evident from Walmart’s most recent strategy of keeping its online prices almost on par to that of Amazon this Cyber Monday. Sources revealed that Walmart’s prices were just 0.3% higher than Amazon’s, clearly reflecting the company’s efforts to gain a good share this holiday season.

While this marks Walmart’s most recent game plan to fend off competition, the big-box retailer has long been taking proactive initiatives to boost e-commerce sales, including buyouts, alliances, and improved delivery and payment systems. Evidently, Walmart’s buyouts of Bonobos, ShoeBuy, Moosejaw, ModCloth and Jet.com, along with its Walmart Pay mobile payment system and Mobile Express Returns program underscore its quest to accelerate online business.

Apart from this, Walmart is undertaking aggressive initiatives to expand in the booming online grocery space, which was a major contributor to e-commerce sales in the third quarter of fiscal 2018. Walmart’s efforts to enhance delivery services also resonates well with its strategy of growing online grocery sales. In this regard, Walmart recently acquired a delivery startup Parcel, Inc, while it also partnered with ride hailing services Uber and Lyft for speedy online grocery deliveries earlier. Other than this, the company’s Walmart Pickup program enables customers to place orders online and then pick them up at a store for free.

Backed by all aforementioned endeavors, Walmart’s U.S. e-commerce sales soared 50%, primarily owing to Walmart.com’s performance, including significant contributions from Walmart’s online grocery service. Notably, these initiatives have helped Walmart to post nine consecutive positive earnings surprises and 13 straight quarters of U.S. comparable store sales growth. All these factors, along with management’s recently raised outlook for fiscal 2018 highlight that this supermarket biggie is most likely to sustain this solid momentum.

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